Ex-Google CEO Eric Schmidt claims that AI is not a bubble, but an entirely new industrial framework.

Eric Schmidt, the ex-CEO and chairman of Google, understands a thing or two about bubbles. He was at the helm of Google during the tumultuous consequences following the dot-com bubble burst in the early 2000s. During that period, the internet was regarded as a groundbreaking technology, which rapidly attracted billions of dollars in investments. However, everything crumbled within a few years as investors failed to receive the anticipated returns. Currently, numerous analysts anticipate that the excitement surrounding AI could end up facing a comparable fate. However, Schmidt is not convinced that history is on a loop.

Speaking at the RAISE Summit in Paris, Schmidt dismissed growing concerns that the AI boom is headed for a comparable crash. “I think it’s unlikely, based on my experience, that this is a bubble,” Schmidt said. “It’s much more likely that you’re seeing a whole new industrial structure”

Schmidt’s remarks arrive during a period when AI is a trending subject, and investors are wholeheartedly engaged, keen to invest their funds in this groundbreaking technology. Following the launch of ChatGPT in late 2022, leading technology companies have invested billions in AI innovation, talent recruitment, and infrastructure. Organizations such as OpenAI, Google, and Meta are leading the charge, competing to attract the best AI talent and develop the infrastructure needed to achieve superintelligence ahead of others.

Reports indicate that the worldwide AI market, valued at $189 billion in 2023, is expected to balloon to an astounding $4.8 trillion by 2033. Amidst significant interest and optimism, many are wondering if AI is being exaggerated, and whether it could experience a downfall akin to the dot-com era, possibly leading to a market crash. During that period, the internet was regarded as a groundbreaking technology, leading investors to invest heavily in internet firms in hopes of significant future returns. By 2000–2001, as profits remained scarce, the bubble collapsed, erasing trillions in value.

Apollo Global Management’s chief economist, Torsten Slok, recently warned that the current AI surge may represent an even larger bubble than the dot-com era. “The top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s,” Slok wrote in a note published on Wednesday.

In contrast, Schmidt points to the hardware demands of AI as a sign of its long-term viability. “You have these massive data centres, and Nvidia is quite happy to sell them all the chips,” he said in Paris. “I’ve never seen a situation where hardware capacity was not taken up by software.”